Business Context and Reporting Period
This Form 6-K filing by Endava Plc, dated October 15, 2019, reports on a material corporate event occurring on October 12, 2019. The filing details the execution of a new multicurrency revolving credit facility intended to support the Company's and its subsidiaries' future capital investments and development activities.
Key Financial Metrics and Facility Terms
- Facility Amount: £200 million unsecured revolving credit facility.
- Replacement: Replaces an existing £50 million secured facility with HSBC UK Bank Plc.
- Expansion Option: Includes uncommitted accordion options for up to an additional £75 million.
- Maturity: October 12, 2022, with an option to extend by up to two years.
- Interest Margin: Base margin of 0.80% per annum over LIBOR/EURIBOR, variable based on Net Leverage Ratio (ranging from 0.80% to 1.50%).
- Commitment Fee: 35% of the applicable margin per annum on unused amounts.
- Security: Unsecured; guaranteed by Endava plc, Endava (UK) Limited, Endava Inc., and Endava LLC.
Material Changes Versus Prior Period
The primary material change is the transition from a £50 million secured facility to a significantly larger £200 million unsecured facility. This change increases available liquidity and removes collateral requirements while introducing variable interest margins tied to the Group's Net Leverage Ratio.
Covenants, Risks, and Management Commentary
Financial Maintenance Covenants
- Net Leverage Ratio: Total Net Debt to Adjusted EBITDA must not exceed 2.5x.
- Interest Cover Ratio: Adjusted EBITDA to Net Finance Charges must not be less than 4.0x.
- Testing Frequency: Tested at the last day of each Financial Year and Financial Half Year based on the preceding twelve months.
Restrictions and Contingencies
- Dividends: Payments of dividends to entities outside the Company or wholly-owned subsidiaries are restricted if the Net Leverage Ratio exceeds 2.0x on a proforma basis.
- Corporate Actions: Restrictions apply to further borrowings, creation of security, asset disposals, and acquisitions above certain thresholds.
- Events of Default: Includes payment defaults, covenant breaches, cross-defaults, bankruptcy, change in control, and material adverse effects.
The filing includes forward-looking statements regarding the availability of borrowing to support future activities, noting that actual results may differ due to risks outlined in the Company's Annual Report on Form 20-F.
Investor Verification Checklist
- Verify the current Net Leverage Ratio and Interest Cover Ratio to ensure compliance with the 2.5x and 4.0x covenants.
- Confirm the status of the accordion option (£75 million) and any conditions required to exercise it.
- Review the impact of the new facility on the Company's weighted average cost of debt compared to the previous secured facility.
- Assess the implications of the dividend restriction clause if the Net Leverage Ratio approaches 2.0x.
- Examine the full text of the Multicurrency Revolving Facility Agreement (Exhibit 99.2) for specific definitions of "Total Net Debt" and "Adjusted EBITDA."